News: September 2014
Not all customers are equal
Most business people are familiar with the idea that 80% of your revenue comes from 20% of your client base. As in any business, your best customers are the ones who buy the most from you. Yes, all customers are important, but not all customers are equal.
In order to truly focus your business on its most valuable customers, you have to segment your customer list and separate your best customers from the rest. The secret to building a successful business is to get customers to re-buy from you.
When developing your next business development and marketing initiative, do so with your very best customers in mind. Present the offer to them first. If they won’t buy your offer, then none of your customers are likely to. You’re rarely going to lose money by trying to sell something to your best customers first. The trust is already there and they have money to spend. Take the product or service offerings that work best and find a way to expand them through the rest of your customer base.
Reward your best customers for continuing to buy from you. A reward could be a discount on their next bill or a client service review over lunch – the right reward depends on your business model and client type.
Segment your customers firstly by the amount they spend; you need to have some way of quantifying that. You can also segment by the type of products or services they buy from you, or by the month or year that they start buying from you. Once you’ve got your list segmented and you’ve got a group of customers who have spent 3-5 times more money with you, on average, than the rest of your customers, you can afford to spend 3-5 times more money on marketing to them.
Remember to consider profitability. Your best customers don’t just buy lots from you – they must also be profitable. A customer who spends more but demands more can often be loss making if margins are tight. Focus on the profitable customers that also generate high levels of revenue for your business. Segment your list by how your clients spend, and then focus on those who spend more money with you. Age and demographics don’t matter as much here as the relationship you’ve built with your customers.